AI's "Low-Cost Carriers" Are Eating The Frontier Labs Alive; Citadel Securities Says Tokenomics 2.0 Is Here And Margins Are Getting Destroyed

Authored by Frank Flight, head of macro strategy at Citadel Securities,

Consumption weighted token prices have declined approximately 50% over six months and average token prices have declined 62% at the frontier, reflecting both the growing share of cheaper open-weight models and price cuts by proprietary providers, likely driven by some combination of improved inference efficiency and competitive pressure. Increased competition from open-weight models may exert pressure on margins at the frontier through time, but the expansion of token volume suggests overall inference demand is accelerating.